Tuesday, January 15, 2013

More on Cyprus

Couple of articles in Der Spiegel that might be of interest or amuse readers of this blog. Spiegel Staff write collectively on the problem that Cyprus is causing, the opposition to the bail-out in Germany itself and other eurozone countries and Chancellor Merkel's visit on Friday.

The financial woes of Cyprus are a thorny issue for the German government, the mood in global financial marks and, most of all, for Europe's bailout policy. Ever since last fall, when SPIEGEL published a report by Germany's Federal Intelligence Service (BND) on money laundering in Cyprus, it has been clear that an aid program for the country would also benefit Russian oligarchs who have deposited billions in assets from dubious sources on the Mediterranean island. According to the BND analysis, if Brussels released the requested aid money, German taxpayer funds could very well be used to protect the illegal assets of Russian business magnates.

This realization triggered hectic activities in various places. In Brussels, the Euro Group of euro zone finance ministers postponed its decision on the bailout program last week, while donor countries like Germany, Finland and the Netherlands voiced concerns. In Cyprus, the government is trying to show it's tough on tax dodgers and money laundering. "Cyprus is no tax haven," Finance Minister Vassos Shiarly insists in an interview with SPIEGEL.

The euro rescuers face a dilemma. On the one hand, they want to prevent the country from going bankrupt. On the other hand, they lack the support of a majority of member states for an aid program that would mostly benefit rich Russian tax fugitives.

The tricky situation is prompting European leaders to do what they always do when a crisis comes to a head: play for time. They want Nicosia to satisfy additional conditions in the fight against tax dodgers and economic criminals. At the same time, Brussels is hoping that current President Dmitris Christofias will be ousted in the February election.

There is also an interview with the Cypriot Finance Minister, Vassos Shierly, in which he "denies accusations that Cyprus encourages worldwide money laundering and is attracting investment by means of tax dumping". Not sure what he means by tax dumping but the money laundering has been reasonably well proven.

2 comments:

Ever since last fall, when SPIEGEL published a report by Germany's Federal Intelligence Service (BND) on money laundering in Cyprus, it has been clear that an aid program for the country would also benefit Russian oligarchs who have deposited billions in assets from dubious sources on the Mediterranean island.

And even last autumn, one can only include that people were shocked, shocked I tell you, to discover that Russians (and assorted Africans, and various other people of uncertain provenance) were laundering money through Cyprus. The questions raised here were questions that should have been raised when Cyprus was applying to join the EU (and later the Euro) rather than as the whole thing was collapsing. Describing them as "questions", even, is too charitable, because it is not like anyone didn't know the answers already.